Confidential working draft 1 13-01-2011
2010 Annual ResultsMonday, January 24th 2011
Confidential Working Draft 1 13-01-2011
Important informationForward-looking statementsThis document and the related oral presentation, including responses to questions following the presentation contain certain forward-looking statements withrespect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items, in particular the sections “Looking ahead” and “Outlook”. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements. These factors include but are not limited to domestic and global economic and business conditions, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips‟ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report 2009 and the “Risk and uncertainties” section in our semi-annual financial report for the six months ended July 4, 2010.
Third-party market share dataStatements regarding market share, including those regarding Philips‟ competitive position, contained in this document are based on outside sources such as research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.
Use of non-GAAP InformationIn presenting and discussing the Philips Group‟s financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in this document. Further information on non-GAAP measures can be found in our Annual Report 2009.
Use of fair-value measurementsIn presenting the Philips Group‟s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices do not exist, we estimated the fair values using appropriate valuation models, and when observable market data are not available, we used unobservable inputs. They require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our 2009 financial statements. Independent valuations may have been obtained to support management‟s determination of fair values.
All amounts in millions of euro‟s unless otherwise stated; data included are unaudited. Financial reporting is in accordance with IFRS, unless otherwise stated. This document comprises regulated information within the meaning of the Dutch Financial Markets Supervision Act „Wet op het Financieel Toezicht‟.
3
Today‟s agenda
Highlights and summary 2010
Gerard Kleisterlee
Financial performance 2010
Pierre-Jean Sivignon
Looking Forward
Gerard Kleisterlee
Highlights and summary 2010
Gerard Kleisterlee
• Emerging from the crisis a stronger company,
with profitability the highest in a decade
• Significantly exceeded Vision 2010 profitability
target with adjusted EBITA of 10.5%
• First half of year strong rebound post-financial crisis
• Second half of the year affected by mixed consumer
demand
• Launched Vision 2015 articulating new
growth agenda
• Seamless transition to new management
2010 Performance Group themes of the year
7
Becoming a global leader in health and well-being
2001
2007
2010
Towards One Philips
Healthcare, Lifestyle
& Technology
High volume
electronics
Leading in health and well-being
Vision 2010
Healthcare, Lighting &
Consumer Lifestyle
Leading in health and well-being
Vision 2015
Q4 PerformanceGroup summary results
Amounts in EUR millions Q4 2009 Q4 2010
Sales1
7,263 7,392
EBITA 662 873
EBITA % 9.1% 11.8%
Adjusted EBITA 895 840
Adjusted EBITA % 12.3% 11.4%
Net income 260 465
Return on Invested Capital 4.0% 11.7%
Free Cash Flow 726 1,336
1 Indicates nominal sales
8
2010 PerformanceGroup summary results
Amounts in EUR millions 2009 2010
Sales1
23,189 25,419
EBITA 1,050 2,552
EBITA % 4.5% 10.0%
Adjusted EBITA 1,474 2,666
Adjusted EBITA % 6.4% 10.5%
Net income 424 1,452
Return on Invested Capital 4.0% 11.7%
Free Cash Flow 863 1,333
9
1 Indicates nominal sales
Adjusted EBITA 14.7% - Sales EUR 8.6 billion
• Full year comparable sales were 4% higher, largely driven by
Home Healthcare Solutions and Customer Care Services.
Incoming equipment orders up 9%
• Sales in Emerging Markets increased by 7%, with notable
increases in China, India and ASEAN - incoming orders up by
16% year on year
2010 Business Highlights
• Philips and Electron partnered to deliver domestically made
healthcare solutions, designed for the Russian market
• At annual RSNA meeting, Philips unveiled “Imaging 2.0”, a
concept fueled by 8 breakthrough innovations in imaging,
providing Philips with leadership in radiology
Healthcare Performance 2010
10
Consumer Lifestyle 2010 performance
11
Adjusted EBITA 7.9% - Sales EUR 8.9 billion
• Strong sales performance in Health and Wellness and
Personal Care
• In TV - weak ending to the year driven by slow consumer
demand. Continued to take decisive actions with brand
license agreements in India and China
2010 Business Highlights
• With the introduction of Senso Touch 3D, Philips has become
the most recommended shaving brand in China
• Continuation of growth strategy with the acquisitions of
Discus Holdings and today‟s announcement of Preethi in
India
• Global headquarters of Domestic Appliances moving to
Shanghai to better serve Asian markets
Adjusted EBITA 12.8% - Sales EUR 7.6 billion
• Overall LED sales grew 79% compared to 2009 resulting in
13% total share of sales in 2010
• Double digit growth in Emerging Markets driven by China,
Brazil, India and Russia
• Sales of green products contributed over 58% to overall
Lighting sales
2010 Business Highlights
• Philips LED replacement solution for traditional 60-watt bulbs
was selected as the best LED replacement lamp of 2010 by
the American Lighting Association (ALA), the Consortium for
Energy Efficiency (CEE), and the US Department of Energy
(DOE)
• We have expanded our portfolio and market leadership with
acquisitions of Luceplan, Burton, NCW Holdings and the street
lighting control business from Amplex
Lighting 2010 performance
12
18%34%
38%
13
2009
2010
2010 PerformanceSales in emerging markets
HealthcareConsumerLifestyle Lighting Philips Group
Mature
70%
Emerging
30%
20%
38%41%Mature
67%
Emerging
33%
Source: Interbrand 2010
Brand Value
USD 8.7 billion
Philips ranks 42nd
Best Global Brands
14
2010 Performance We are a leading global brand
High performance benchmark
2010 Performance Philips people drive productivity
Philips benefits from:
A strong leadership team
A highly engaged workforce
Productivity per employee,
which increased by 20% year
on year
Employee Engagement Index
2010
75
69
64
61
59
2005 2006 2007 2008
68
2009
Philips at high performance normThe 2010 „employee engagement index‟ polling over
90,000 of the Philips workforce showed we are amongst
the world‟s top-ranking companies
15
16
Becoming a global leader in health and well-being
2001
2007
2010
Towards One Philips
Healthcare, Lifestyle
& Technology
High Volume
Electronics
Leading in health and well-being
Vision 2010
Healthcare, Lighting &
Consumer Lifestyle
Leading in health and well-being
Vision 2015
Saeco (2009)
Discus (2010)
Emerging Markets
Dynalite (2009)
Selecon (2009)
Ilti Luce (2009)
Genlyte (2008)
Lighting Technologies (2007)
Burton (2010)
Teletrol (2009)
NSW (2010)
Luceplan (2010)
InnerCool Therapies (2009)
Traxtal (2009)
Respironics (2008)
VMI-Sistemas Medico (2007)
Visicu (2008)
Emergin (2007)
Raytel (2007)
Tecso Informatica (2010)
Somnolyzer (2010)
CDP Medical Ltd. (2010)
Apex (2010)
Wheb Sistemas (2010)
Dixtal Biomedica e Technologia (2008)
Meditronics (2008)Alpha X-Ray (2008)
Medel (2008)
Shenzhen Goldway (2008)
Tomcat (2008)
Interactive Medical Developments (2008)
Lighting Consumer lifestyleHealthcare
VMI-Sistemas Medico (2007)
Dixtal Biomedica e Technologia (2008)Tecso Informatica (2010)
Meditronics (2008)Alpha X-Ray (2008)
Shenzhen Goldway (2008)
Apex (2010)
Wheb Sistemas (2010)
NSW (2010)
Street Controls(2010)
Strategic acquisitionsCapital reallocation laid down the foundation for a more focused portfolio
Strategic acquisitions since mid-September 2007
Saeco (2009)
Discus (2010)
Dynalite (2009)
Selecon (2009)
Ilti Luce (2009)
Genlyte (2008)
Lighting Technologies (2007)
Burton (2010)
Teletrol (2009)
NSW (2010)Optimum (2011)Luceplan (2010)
InnerCool Therapies (2009)
Traxtal (2009)
Respironics (2008)
VMI-Sistemas Medico (2007)
Visicu (2008)
Emergin (2007)
Raytel (2007)
Tecso Informatica (2010)
Somnolyzer (2010)
CDP Medical Ltd. (2010)
Apex (2010)
Wheb Sistemas (2010)
Dixtal Biomedica e Technologia (2008)
Meditronics (2008)Alpha X-Ray (2008)
Medel (2008)
Shenzhen Goldway (2008)
Tomcat (2008)
Interactive Medical Developments (2008)
MedSage (2011)
Lighting Consumer lifestyleHealthcare
Street Controls(2010)
Preethi (2011)
Strategic acquisitionsCapital reallocation laid down the foundation for a more focused portfolio
Strategic acquisitions since mid-September 2007
Saeco (2009)
Discus (2010)
Dynalite (2009)
Selecon (2009)
Ilti Luce (2009)
Genlyte (2008)
Lighting Technologies (2007)
Burton (2010)
Teletrol (2009)
NSW (2010)
Luceplan (2010)
InnerCool Therapies (2009)
Traxtal (2009)
Respironics (2008)
VMI-Sistemas Medico (2007)
Visicu (2008)
Emergin (2007)
Raytel (2007)
Tecso Informatica (2010)
Somnolyzer (2010)
CDP Medical Ltd. (2010)
Apex (2010)
Wheb Sistemas (2010)
Dixtal Biomedica e Technologia (2008)
Meditronics (2008)Alpha X-Ray (2008)
Medel (2008)
Shenzhen Goldway (2008)
Tomcat (2008)
Interactive Medical Developments (2008)
Lighting Consumer lifestyleHealthcare
Street Controls(2010)
Optimum (2011)
MedSage (2011)
Preethi (2011)
Emerging Markets
Strategic acquisitionsCapital reallocation laid down the foundation for a more focused portfolio
Strategic acquisitions since mid-September 2007
• Philips acquires Preethi to drive kitchen appliance market
growth in India
• This acquisition makes Philips the clear leader in this
fast-growing segment in India
• Preethi has seen several years of double-digit revenue
growth
• Demand for Preethi‟s products is expected to continue
to rise rapidly as India‟s middle class expands
• The acquisition demonstrates Philips‟ commitment to
drive local innovation
Strategic acquisitionsPhilips to acquire Preethi
Healthcare
Lighting
Consumer Lifestyle1
Components
Semiconductors
Origin IT Services
Other
Transforming PhilipsProfound shift towards health and well-being
We have fundamentally simplified our business portfolio, investing proceeds
from disposals in our Healthcare, Consumer Lifestyle and Lighting businesses
8%
12%
5%2%
2000actual
sales split
1 Consumer Lifestyle in 2000 includes the former DAP and Consumer Electronics divisions
Last 12 months
Sept ‟10
21
8%
13%
44%
12%
16%
2%
5%
34%
30%
36%
2010
22
3%
Customer Services
Home Healthcare
Patient Care and Clinical
Informatics
Imaging Systems
14%
Healthcare
We diversified beyond Imaging
Systems and created a significant
Home Healthcare business
2007 2010
55%
TV
Other
63%
Consumer Lifestyle
We managed to grow higher-margin
categories such as Health and
Wellness and Domestic Appliances
Packaged LEDs
Lamps & Lighting Electronics
Professional & Consumer
Luminaries
Lighting
We transformed Lighting from a
lamps business to a solutions &
applications business while firming
up our LED position
Health and wellness,
Domestic appliances,
Personal Care
37%22%
Other
24%
34%
Transforming PhilipsWe built a portfolio of businesses that stands to grow on the back of global trends
6.7% 6.7% 6.6%
10.8%
5.6% 6.9%5.4% 5.8%
0.1%
3.7%
6.8%
12.3%
9.8% 10.0% 10.6% 11.4%
0
200
400
600
800
1000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
5.9%6.8% 7.0%
10.8%
4.5% 6.1%
0.9%0.4%
-1.5%
2.3%
6.1%
9.1% 8.9% 8.5%
10.5%11.8%
-200
0
200
400
600
800
1000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
23
Record profitability in 2010 Adjusted EBITA
1of 10.5%
In EUR millions
1 Adjusted EBITA: EBITA excluding exceptional items such as restructuring charges and acquisition-related charges;
year 2007 US GAAP, years 2008 -2009 IFRS
2007 2008 2009 2010
Reported EBITA of 10%
Dividend more than doubled in the last decade
“Our aim is to sustainably grow our dividend over time. Philips‟ present dividend policy is based on
an annual pay-out ratio of 40% to 50% of continuing net income.”
1 Elective dividend, proposal subject to approval in the General Shareholders Meeting on March 31st
2011
1
EUR cents per share1
0.30
0.36 0.36 0.36 0.360.40
0.44
0.60
0.70 0.70 0.700.75
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
24
Implement strategy
Increase our market position
in emerging markets
Drive key strategy initiatives
for each sector
Move towards leadership position
in imaging
Grow Home Healthcare
Grow Health and Wellness
Manage TV to profitability
Become lighting solutions
leader in outdoor
Grow consumer luminaires
Optimize lamps lifecycle
Leverage Sustainability as an
integral part of our strategy
25
Management agenda 2010The leading company in Health and Well-being
Drive performance
Drive top-line growth and
market share
Continue to reduce costs
and improve cost agility
Further increase cash flow by
managing cash aggressively
Accelerate change
Increase customer centricity
by empowering local markets
and customer facing staff
Increase number of
businesses with NPS
co/leadership positions
Increase employee
engagement to high
performance level
26
Financial performance 2010
Pierre-Jean Sivignon
Summary results Q4 and full year 2010
Q4 2010
• Net income of EUR 465 million, an increase of EUR 205 million compared to Q4
2009
• EBITA of EUR 873 million and sales of EUR 7.4 billion
• Further improvement in asset efficiency generated solid cash flow
Full year 2010
• EBITA margin of 10%, hitting Vision 2010 target. Adjusted EBITA margin of 10.5%,
which is significantly higher than the 6.4% in 2009
• Free cash flow of EUR 1.3 billion driven by improvements in all sectors. Strong
recovery of ROIC, reaching 11.7% in the last quarter of 2010
• Sales of EUR 25.4 billion, 10% nominal and 4% comparable growth
27
28
Q4 2010 results
Q4 2010 – Summary results of the Philips Group
Amounts in EUR millions Q4 2009 Q4 2010
Sales 7,263 7,392
Comparable sales growth 1 0% (4)%
Comparable sales growth excl. Television 1 (1)% (2)%
EBITA 662 873
EBITA% 9.1% 11.8%
Net income (loss) 260 465
Net Operating Capital 12,649 12,071
Free Cash Flow 726 1,336
Net debt to group equity (1) : 101 (8) : 108
1 Excluding the effects of currency movements and changes in portfolio2 Excluding a EUR 485 million net legal settlement the free cash flow is EUR 1,211 million 29
2
Q4 2009 Q4 2010 % nominal % comp1
Healthcare 2,405 2,642 10 2
Consumer
Lifestyle2,903 2,687 (7) (11)
Lighting 1,846 1,975 7 0
Philips Group2 7,263 7,392 2 (4)
Q4 2010 - Sales per business sector
Sales growthAmounts in EUR millions
1 Comparable sales growth; excluding the effects of currency movements and changes in portfolio2 Philips Group includes results Group Management & Services (GM&S) 30
Consumer Lifestyle excl. Television (2) (6)
Philips Group2 excl. Television 5 (2)
Q4 2010 - Sales per market cluster
Q4 2009 Q4 2010 % nominal % comp1
Western Europe 2,804 2,540 (9) (10)
North-America 1,802 1,978 10 1
Other mature
markets421 462 10 (4)
Emerging
markets2,235 2,412 8 (1)
Philips Group 7,263 7,392 2 (4)
Sales growthAmounts in EUR millions
1 Comparable sales growth; excluding the effects of currency movements and changes in portfolio2 Comparable sales in emerging markets excluding TV is +3%, excluding TV and Brazil +7% 31
2
Accounting calendar changes
32
Q1 Q2 Q3 Q4
2009 61 61 65 68
2010 65 61 65 65
2011 65 62 65 64
Number of working days in Philips Calendar
• Change in Philips calendar between 2009 and 2010 had major impact on
quarterly distribution of working days in 2010
• Due to uneven number of days in 2010 (compared to 2009), quarterly distribution
of sales was significantly distorted
• As a result, reported quarterly comparable sales growth in Q1 2010 was positively
impacted while growth in Q4 2010 was negatively impacted
Q4 2010 comparable growth negatively impacted by approximately -4%
EBITA development in the quarterAmounts in EUR millions
33
0
200
400
600
800
1000
4Q09 4Q10 4Q09 4Q10 4Q09 4Q10 4Q09 4Q10 4Q09 4Q10
11.8%
19.8%
5.6%10.0%
18.8%
4.4%
9.1%
Healthcare Consumer Lifestyle Lighting Group
9.2%
EBITA & EBITA% – Q4 2010
0
200
400
600
800
1000
4Q09 4Q10 4Q09 4Q10 4Q09 4Q10 4Q09 4Q10 4Q09 4Q10
11.4%
19.6%
6.2%11.7%
19.9%
10.0%
12.3%
Healthcare Consumer Lifestyle Lighting Group
11.4%
Adjusted EBITA & Adjusted EBITA% 1 – Q4 2010
1 - Net adjustment based on disclosed incidentals (in EUR million)
Q4 „09/‟10: (27) 4 (65) (15) (103) (34) (233) 33 (228) 45
Group excl. Television
Group excl. Television
14.5%
10.2%
13.8%13.9%
34
Continued strict cash flow managementSignificant improvement from Q3 2010 position
EUR millions
1 Working Capital of Healthcare, Consumer Lifestyle and Lighting; excluding central sector GM&S
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
500
1000
1500
2000
2500
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Working capital 1
Working capital as % of last twelve months sales
35
Working capital per business sector Significant improvement in Consumer Lifestyle
10%
13%
16%
19%
0
500
1,000
1,500
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
-7%
-2%
3%
8%
-400
-200
0
200
400
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
8%
13%
18%
0
500
1,000
1,500
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Healthcare
Consumer
Lifestyle
Lighting
Working capital Average working capital as % for the yearAmounts in EUR millions
36
Full year 2010 results
Full year 2010 – summary results of the Philips Group
Amounts in EUR millions 2009 2010
Sales 23,189 25,419
Comparable sales growth 1 (11)% 4%
Comparable sales growth excl. Television 1 (9)% 5%
EBITA 1,050 2,552
EBITA% 4.5% 10.0%
Net income (loss) 424 1,452
Net Operating Capital 12,649 12,071
Free Cash Flow 863 1,333
Net debt to group equity (1) : 101 (8) : 108
1 Excluding the effects of currency movements and changes in portfolio2 Excluding a EUR 485 million legal settlement the free cash flow is EUR 1,348 million 37
2
Full year 2010 - sales per business sector
2009 2010 % nominal % comp1
Healthcare 7,839 8,601 10 4
Consumer
Lifestyle8,467 8,906 5 1
Lighting 6,546 7,552 15 9
Philips Group2 23,189 25,419 10 4
Sales growthAmounts in EUR millions
1 Comparable sales growth; excluding the effects of currency movements and changes in portfolio2 Philips Group includes results Group Management & Services (GM&S) 38
Consumer Lifestyle excl. Television 8 1
Philips Group2 excl. Television 11 5
Full year 2010 - sales per market cluster
2009 2010 % nominal % comp1
Western Europe 8,387 8,363 0 (1)
North-America 6,609 7,085 7 1
Other mature
markets1,260 1,634 30 12
Emerging
markets6,930 8,337 20 12
Philips Group 23,189 25,419 10 4
Sales growthAmounts in EUR millions
39
1 Comparable sales growth; excluding the effects of currency movements and changes in portfolio2 Comparable sales in emerging markets excluding TV is +13%
2
Full year 2010 - EBITA development Amounts in EUR millions
40
0
500
1000
1500
2000
2500
3000
2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
10.0%
13.8%
7.2%11.5%10.8%
2.2%
4.5%
Healthcare Consumer Lifestyle Lighting Group
4.0%
EBITA & EBITA% – FY 2010
0
500
1000
1500
2000
2500
3000
2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
10.5%
14.7%
7.9%12.8%12.2%
6.0%
6.4%
Healthcare Consumer Lifestyle Lighting Group
6.2%
Adjusted EBITA & Adjusted EBITA% 1 – FY 2010
Group excl. Television
Group excl. Television
12.0%
6.1%
12.4%
7.9%
1 - Net adjustment based on disclosed incidentals (in EUR million)
FY „09/‟10: (106) (77) (184) (61) (246) (97) (424) (114) (361) (84)
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2009 2010
Our ROIC is on the right trajectory after significant M&AROIC at 11.7% in Q4 2010
Notes:
EBIAT are earnings before interest after tax
Philips calculates ROIC % as: EBIAT/ NOC
Quarterly ROIC % is based on LTM EBIAT and average NOC over the last 5 quarters
Reported tax used to calculate EBIAT
• Early 2008 we doubled our asset
base, as we invested in growing our
home healthcare business with the
acquisition of Respironics and
strengthened our global leadership in
professional luminaires with the
acquisition of Genlyte
• Late 2008 and 2009 the crisis had a
severe impact on our revenues and
Earnings Before Interest and After
Tax (EBIAT), which caused our ROIC
to deteriorate sharply
• In 2010 we emerged as a structurally
stronger company with significantly
higher profitability levels, our ROIC is
now 3.6% above the WACC rate
Development of Return on Invested Capitalin billions of euro
WACC rate at 8.1%
in percentage
Significant acquisitions
ROIC
6
5
4
3
2
1
0
41
4242
Delivered on our fixed costs reduction program
1 These numbers exclude acquisition-related charges of EUR 130M for FY2008, EUR 101M for FY2009 and EUR 71M for FY2010
RestructuringCost1 Cash out Benefit2
compared to 2008 baseline
EUR millionFY2008 FY2009 FY2010 FY2010 FY2009 FY2009 &
FY 2010
Healthcare (63) (42) (48) (24) 105 193
Consumer Lifestyle (198) (120) (42) (17) 200 294
Lighting (245) (225) (74) (112) 82 217
GM&S (31) (63) 2 (7) 31 37
TOTAL (537) (450) (162) (160) 418 741
In view of macro-economic developments, Philips accelerated their planned initiatives to further increase
organizational effectiveness and to lower fixed cost by streamlining operations and simplifying the structure.
Our restructuring plans announced since 2008 has lead to a reduction in our 2010 fixed cost base of EUR
741 million compared to the run rate in 2008.
Philips' debt has a long maturity profile
1 Short term debt consists mainly of local credit facilities that are being rolled forward on a continuous basis. 43
0
500
1,000
1,500
2,000
2,500
3,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2021 2025 2026 2038
Debt maturity profile as of December 2010Amounts in EUR millions
Characteristics of long-term debt
Maturities up to 2038
Average tenor of long-term debt is 9 years
No financial covenants
Long-term debt maturity < 12 months
Long –term debt
Short-term debt 1
Unutilized standby & other committed facilities
Capital allocationContinuing our capital allocation priorities from recent years
51%
32%
17%
Acquisitions
2007 – 2010
100% = EUR 13 billion
Dividend
Share
repurchase
1. Maintain our A-rating
2. Sustainable dividend growth
(40-50% of continuing net
income)
3. Acquisitions / investments in
growth markets
4. Share repurchase
Capital allocation priorities
44
Looking forward
Gerard Kleisterlee
Vision 2015Our ambition
Philips wants to be a global leader in
health and well-being,
becoming the preferred brand
in the majority of our chosen markets.
We believe Philips is uniquely positioned for
growth through its ability to simply make a
difference to people‟s lives with meaningful,
sustainable innovations.
47
The rise of
emerging markets
Aging population
Increased consumer
empowerment and
sustainable lifestyles
Climate change and
sustainable development
Vision 2015Leveraging critical growth trends
48
• Expand leadership positions while benefiting from
markets growing faster than GDP
• Be the preferred brand in the majority of our
chosen markets
• Lead in sustainability
• Be seen by all stakeholders as making a positive
difference in people‟s lives
Vision 2015Outlining four key priorities
49
• Comparable sales growth on annual average basis equal to
real GDP + a minimum of 2%
• Reported EBITA between 10% and 13% of sales
• Growth of EPS at double the rate of comparable annual sales growth
• Return on Invested Capital at least 4% above
• Weighted Average Cost of Capital
Vision 2015Our financial aspirations 2011-2015
50
Vision 2015Uniquely positioned for continued growth across our sectors
SECTORMANAGE FOR
CASH
OPTIMIZE
POSITION
DRIVE
GROWTH
INVEST FOR
LONG-TERM
GROWTH
Healthcare • Diagnostic imaging
• Home Healthcare
• Patient Care and
Clinical Informatics
• Customer Service
• Image guided
intervention / therapy
• Clinical decision
support
• Home Healthcare
Lifestyle • TV
• Personal Care
• Domestic Appliances
• Accessories
• AVM
• Health & Wellness
• Kitchen Appliances /
Beverage Appliances
• Lifestyle management
• Skincare
• Water & Air
Lighting• Automotive
• Conventional lamps
• LED lamps
• Professional
Luminaires
• Consumer Luminaires
• Smart Lighting
Solutions
• Service extensions
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The company management agenda 2011Accelerate growth to achieve Vision 2015
Drive performance
• Make the turn to faster
growth and gain market
share
• Deliver on financial
returns
• Deliver on our Ecovision
sustainability
commitments
Improve capabilities
• Champion customer
responsiveness and
adopt culture of growth
• Improve speed and
execution to market
• “Resource to win” now to
ensure to achieve Vision
2015
Implement strategy
• Strengthen and grow in
all emerging markets -
make China a “home”
market
• Execute “must win”
strategic battles in key
business-market
combinations
• Pursue value-creating
acquisitions and invest in
growth to strengthen our
portfolio
• Building on our legacy: Philips in its 120th year
• Vision 2015 strategic plan launched
• Philips is well positioned to respond to fast-
changing market conditions
• Seamless transition to new management
Looking forwardTargeting growth
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Becoming a global leader in health and well-being
2001
2007
2010
Towards One Philips
Healthcare, Lifestyle
& Technology
High Volume
Electronics
Leading in health and well-being
Vision 2010
Healthcare, Lighting &
Consumer Lifestyle
Leading in health and well-being
Vision 2015
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“Improve the quality of people‟s
lives through timely introduction
of meaningful innovations”
We have reinvented ourselves but one thing never changed, our mission to:
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